IEA cuts 2014 oil demand outlook on weaker than expected growth

PARIS: The International Energy Agency (IEA) on Friday cut its forecast for 2014 oil demand to 92.7 million barrels a day because of weaker than expected global economic growth.

The revised forecast shows a drop of 130,000 barrels a day from the IEA’s prediction a month ago.

It reflects the “growing realisation that macroeconomic conditions, although still likely to strengthen in the second half of the year, will probably now do so at a less dramatic pace than previously forecast.”

International Monetary Fund chief Christine Lagarde hinted last week that the 3.6 percent global growth forecast for 2014 may have to be trimmed.

Her warning that the strength of the global economic recovery could be “less robust than expected” appeared to be borne out by a series of economic data released recently.

The United States said late June its economy shrank a steep 2.9 percent in the first quarter, its worst contraction in five years.

On the supply side, members of the OPEC cartel pumped out 40,000 barrels a day less in June to 30.03 million on a daily basis, with decline in Iraqi output partly offset by small increases from Saudi Arabia, Iran, Nigeria and Angola.

The IEA said the siege by jihadists in Iraq had led to output falling by 260,000 barrels a day in June to 3.17 million, after the fighting forced the closure of the country’s biggest refinery at Baiji and slashed production from the giant Kirkuk field.

But the prized oil fields are so far insulated from the fighting.

The IEA said, however, that there are still risks that the militants could target the infrastructure.

“Should ISIS militants strike the southern oil network—now churning out nearly all of Iraq’s supply to world markets and generating most of Baghdad’s revenue—Asia, which takes roughly 60 percent of Basra Light shipments, would be most vulnerable,” it said.

China is the biggest buyer of Iraqi oil while India is the second biggest, the IEA said.